~ compila tion of the general financial rules of thelib.pmo.gov.bd/gfr/1.pdf~ compila tion of the...

General Financial Rules

~ COMPILA TION OF THE GENERAL FINANCIAL RULES OF THEGOVERNMENT

CHAPTER I-INTRODUCTION

I-INTRODUCTORY

1. The rules contained in this volume, which are essentially executive orders of the President,describe primarily the financial powers of different authorities subordinate to the Government and theprocedure prescribed by the President, which should be followed by them in the securing andspending of the funds necessary for the discharge of the functions entrusted to them. Departmentalauthorities should follow these rules, supplemented or modified by the special rules and instructions,if any, contained in their departmental regulations and other special orders applicable to them.

II -DEFINITIONS

2. Unless there be anything repugnant in the subject or context, the terms defined in this Chapter areused in these rules in the sense hereby explained--

(i) Accounts Officer- means The Controller General of Accounts and an AccountsOfficer subordinate to the Controller General of Accounts and includes ThanaAccounts officer, District Accounts Officer, Regional Accounts Officer and ChiefAccounts Officer.

n (ii) Appropriation- means the assignment to meet specified expenditure of funds at the~ disposal of the assigning authority.

(iii) Auditor General- means the Comptroller and Auditor General of Bangladesh.(iv) Bank- means the Bangladesh Bank or any of its offices or branches and includes any

Branch of Sonali Bank acting as an agent of Bangladesh Bank in accordance with theprovision of Bangladesh Bank order, 1972.

(v) Competent Authority- means the Government or any other authority to which therelevant powers may be delegated by the Government.

(vi) Controlling Officer- means the head of a department or other departmental officerwho is entrusted with the responsibility of controlling the incurring of expenditureand/or the collection of revenue by the authorities subordinate to the department.

(vii) Constitution- means the Constitution of the People's Republic of Bangladesh.(viii) Controller General of Accounts- means the Controller General of Accounts of

Bangladesh.(ix) Drawing Officer- means a Government Servant who has been authorised to draw

bills to pay for services rendered or supplies made to Government.(x) Finance Division- means the Finance Division of the Ministry of Finance.(xi) Financial Year- means the year beginning on the 1st of July and ending on the 30th

June following.(xii) Government- means the Government of the People's Republic of Bangladesh.(xiii) Head of a Department- (1) means any authority declared to be such with reference

to Rule 2(1.0) of the Supplementary Rules, if the declaration is made in general termsC \ an~ not with reference to certain specified rules. only, and (2) includes any other

offIcer declared to be such by the competent authorIty.

(xiv) Non-recurring expenditure- means expenditure sanctioned as a lump sum charge,whether the money be paid as a lump sum or by instalments.

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(xv) Primary unit of appropriation- means a lump sum of money placed by theGovernment at the disposal of a subordinate authority. 0-

(xvi) Principal Accounting Officer -means the Secretary or the Secretary-in-charge of a cYMinistry or Division.

(xvii) Public Accounts -means the Consolidated Fund and the Public Account of theRepublic as defined in Article 84 and 86 of the Constitution.

(xviii) Public Works -means Civil Works including Roads and Highways, Housing andSettlement and Public Health Engineering.

(xix) Public Works Department- means the Department of the Government in specificadministrative charge of public works.

(xx) Re-appropriation -means the transfer of funds from one unit of appropriation toanother such unit.

(xxi) Recurring Expenditure -means all expenditure which is not non-recurring.(xxii) Subordinate Authority -means a Department of the Government or any authority

subordinate to the President.(xxiii) Treasury Rules -means the Treasury Rules of the Government.

3. Heads of departments have been authorised to declare any Gazetted officer subordinate to themto be the 'head of an office' for the purpose of these and other financial rules of Government.

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General Financial Rules.

0 CHAPTER 2

GENERAL SYSTEM OFFINANCIAL MANAGEMENT AND CONTROL

I -RECEIPT OF MONEY

GENERAL

4. All transactions to which any officer of the Government is a party in his official capacity must bebrought to account without delay.

5. Moneys received as dues of Government or for deposit in the custody of Government should becredited into the PUblic Accounts in accordance with the Treasury Rules.

6. If a Government officer receives in his official capacity moneys which are not Government duesor the deposit of which in the custody of Government has not been authorised by Government, hemust open an account for their deposit with a Branch of Sonali Bank or a Post Office Savings Bank.The prior approval of Government is required to their deposit in any other Bank. The Governmentofficer receiving such moneys is personally responsible for seeing that they are disbursed in strictconformity with the rules, regulations or orders governing the fund to which the moneys appertain,that a precise record of all the transactions is kept in a form complying with the regulations of the

.fund concerned and that the accounts are subjected to proper audit checks.(-,

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"'-- WITHDRA W AL OF MONEYS FROM THE PUBLIC ACCOUNTS.

7. Unless otherwise expressly authorised by any law or rule or order having the force of law,moneys may not be removed from the PUblic Accounts for investment or deposit elsewhere withoutthe consent of the Finance Division.

ASSESSMENT, COLLECTION AND CHECK OF REVENUES

8. Subject to such general or specific instructions as may be issued by Government in this behalf, itis the duty of the Revenue or Administrative Department concerned to see that the dues ofGovernment are correctly and promptly assessed, collected and paid into the Bank. Detailedinstructions on the subject are contained in Chapter 3.

II EXPENDITURE AND PAYMENT OF MONEYS.

ESSENTIAL CONDITIONS GOVERNING EXPENDITURE FROM PUBLIC FUNDS

9. As a general rule no authority may incur any expenditure or enter into any liability involvingexpenditure from public funds until the expenditure has been sanctioned by general or special ordersof the Government or by an authority to which power has been duly delegated in this behalf and theexpenditure has been provided for in the authorised grants and appropriations for the year.

STANDARDS OF FINANCIAL PROPRIETY

L 10. Every officer incurring or authorising expenditure from public funds should be guided by highstandards of financial propriety. Among the principles on which emphasis is generally laid are thefollowing:

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I. Every public officer is expected to exercise the same vigilance in respect of expenditureincurred from public moneys as a person of ordinary prudence would exercise in respect ofexpenditure of his own money. (,":J

ll. The expenditure should not be prima facie more than the occasion demands.

lli. No authority should exercise its powers of sanctioning expenditure to pass an order whichwill be directly or indirectly to its own advantage.

IV. Public moneys should not be utilised for the benefit of a particular person or section of thecommunity unless -

(1) the amount of expenditure involved is insignificant, or(2) a claim for the amount could be enforced in a court of law, or(3) the expenditure is in pursuance of a recognized policy or custom.

V. The amount of allowances granted to meet expenditure of a particular type should be soregulated that the allowances are not on the whole a source of profit to the recipients.

CONTROL OF EXPENDITURE

11. Each head of a department is responsible for enforcing financial order and strict economy atevery step. He is responsible for observance of all relevant financial rules and regulations both by hisown office and by subordinate disbursing officers.

12. A Controlling officer must see not only that the total expenditure is kept within the limits of the, authorised appropriation but also that the funds allotted to spending units are expended in the public

interest and upon objects fo: which the money was provided. In order to maintain a proper contr?l,. he ,~should arrange to be kept mformed, not only of what has actua]]y been spent from an apprOprIatIonbut also what commitments and liabilities have been and wi]] be incurred against it. He must be in aposition to assume before Government and the Public Accounts Committee, if necessary, completeresponsibility for departmental expenditure and to explain or justify any instance of excess orfinancial irregularity that may be brought to notice as a result of audit scrutiny or otherwise.

INTERNAL CHECK AGAINST IRREGULARITffiS, WASTE AND FRAUD

13. In the discharge of his ultimate responsibilities for the administration of an appropriation or partof an appropriation placed at his disposal, every Contro]]ing Officer must satisfy himself not only thatadequate provisions exist within the departmental organisation for systematic internal checkscalculated to prevent and detect errors and irregularities in the financial proceedings of itssubordinate officers and to guard against waste and loss of public money and stores, but also that theprescribed checks are effectively applied.

DELAYS IN PAYMENT

14. Delay in the payment of money indisputably due by Government is contrary to a]] rules andbudgetary principles and should be avoided vide also paras. 109 and 110.

III- DUTIES AS REGARDS ACCOUNTS

MAINTENANCE OF ACCOUNTS

15. Every officer whose duty is to prepare and render any accounts or returns in respect of public (:])money or stores is persona]]y responsible for their completeness and strict accuracy and theirdispatch within the prescribed date.

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16. An officer who signs or countersigns a certificate is personally responsible for the facts certifiedto, so far as it is his duty to know or to the extent to which he may reasonably be expected to be

0 ', aware of them. The fact that a certificate is printed is no justification for his signing it unless itj represents the facts of the case.. If in its printed form it does not represent the facts, it is his duty to

make any necessary amendment which will call attention to the deviation and so .to give theauthority concerned the opportunity of deciding whether the amendments cover requirements.

RESPONSffiILITY FOR OVERCHARGES AND DEMANDFOR INFORMATION BY AUDIT

17. (1) A drawer of pay, abstracts or bills for pay, allowances or contingent expenses will be heldresponsible for any overcharge.

(2) The responsibility of countersigning officers will be that which attaches to all controllingofficers.

(3) The Accounts Officer will be responsible for checking any palpable errors, and (in the caseof change of office, or of rate of pay of Gazetted Government servants) for passing the new rate withreference to the orders directing the change. He is also required to examine the accuracy of thearithmetical computations in a bill.

(4) The responsibility will thus rest primarily with the drawer of the bill and (failing recoveryfrom him) the overcharge will be recovered from the Accounts Officer, or the countersigning officer,

, only in the event of culpable negligence on the part of either of them.

( 18. Every Government servant, entrusted with the duty of making payments on behalf of"-- Government, should attend promptly to all objections and orders communicated to him by the

Auditor General, either direct, or through the Audit Officer, by letters, audit memoranda, etc., andreturn the audit memoranda or reply to objections within a fortnight or send letters explaining thecause of delay.

19. It is the duty of every departmental and controlling officer to see that the Auditor General isafforded all reasonable facilities in the discharge of his functions and furnished with the fullestpossible information for which he may ask, for the preparation of any reports which it is his duty toprepare. No such information nor any books or other documents to which Auditor General has astatutory right of access shall be withheld from him.

IV- CONTRACTS

GENERAL PRINCIPLES

20. No contracts may be entered into by any authority which has not been empowered to do so by orunder the orders of the Government. The Ministry of Law, Justice and Parliamentary Affairs isauthorised to issue instructions for the making of contracts on behalf of the President and theexecution of such contracts and all assurances of property vide Rule 5(iv) of Rules of Business 1975(revised upto December, 1989). Subsidiary orders of Government as to the limitation upon thepowers of subordinate authorities, the conditions under which such powers should be exercised and

r--" the general procedure prescribed with regard to such contracts, such as calling for and acceptance ofU tenders, etc., are laid down in the appropriate departmental regulations.

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21. The following general principles have been laid down for the guidance of authorities which haveto enter into contracts or agreements involving expenditure from public funds:-

(i) The terms of a contract must be precise and definite and there must be no room for 0ambiguity or misconstruction therein.

(ii) As far as possible, legal and financial advice should be taken in the drafting of contractsand before they are finally entered into.

(iii) Standard forms of contracts should be adopted wherever possible, the terms to besubject to adequate prior scrutiny.

(iv) The terms of a contract once entered into should not be materially varied without theprevious consent of the authority competent to enter into the contract as so varied. Nopayments to contractors by way of compensation, or otherwise, outside the strict termsof the contract or in excess of the contract rates, may be authorized without the previousapproval of the competent authority.

(v) No contract involving an uncertain or indefinite liability or any condition of an unusualcharacter should be entered into without the previous consent of the competentauthority.

(vi) Whenever practicable and advantageous, contracts should be placed only after tendershave been openly invited and, in cases where the lowest tender is not accepted, reasonsshould be recorded.

(vii) In selecting the tender to be accepted, the financial status of the individuals and firmstendering must be taken into consideration in addition to all other relevant factors.

(viii)Even in cases where a formal written contract is not made, no order for supplies, etc.,should be placed without at least a written agreement as to the price.

(ix) Provision must be made in contracts for safeguarding Government property entrusted toa contractor.

(x) The Auditor General and, under his direction, other audit authorities have the power to (~examine contracts and to bring before the Public Accounts Committee any cases wherecompetitive tenders have not been sought or high tenders have been accepted or whereother irregularities have come to light.

(xi) When a contract is likely to endure for a period of more than 5 years, it should, whereverfeasible, include a provision for an unconditional power of revocation or cancellation byGovernment at any time on the expiry of six months' notice to that effect.

V- DEFALCATIONS, LOSSES, ETC.

REPORT OF LOSSES

22. (1) With the exceptions noted below, any loss of public money, departmental revenue orreceipts, stamps, opium, stores or other property held by or on behalf of Government, caused bydefalcation or otherwise, which is discovered in a treasury or other office or department, should beimmediately reported by the officer concerned to his immediate official superior as well as to theChief Accounts Officer concerned even when such loss has been made good by the party responsiblefor it. Such reports must be submitted as soon as a suspicion arises that there has been a loss; theymust not be delayed while detailed inquires are made. When the matter has been fully investigated, afurther and complete report should be submitted of the nature and extent of the loss, showing theerrors or neglect of rules by which such loss was rendered possible, and the prospects of effecting arecovery .

(2) If the irregularity be detected by Audit in the first instance, the Audit Officer will report it (:)immediately to the administrative authority concerned, and if he considers necessary, to Governmentas well.

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Exception J. -In the cas~ of Customs, Excise and V AT Revenue, (a) mistakes in assessments whichare discovered too late to permit of a supplementary claim being made, and (b) under-assessments

C! which are due to the interpretation of the law by the local Customs authority being overruled by" higher authority more than three months after the assessment was made, need not be reported to the

Accounts Officer. A record should, however, be kept of such cases for examination by the AuditorGeneral at the time of Audit.

Exception 2. -Petty cases, that is, cases involving losses not exceeding amounts prescribed by theGovernment in each case need not be reported to the Chief Accounts Officer unless there are, in anycase, important features which merit detailed investigation and consideration.

23. The officers receiving a report submitted to him under Para 22 must forward it forthwith toGovernment through the usual channel with such comments as may be considered necessary. Heshould also submit a detailed report, after completing such departmental investigations as may benecessary or expedient on the causes or circumstances which led to the defalcation or loss, the stepstaken to prevent its recurrence and the disciplinary or any other action proposed as regards the

persons responsible.

ACCmENTS

24. Any serious loss of immovable property, such as buildings, communications, or other works,caused by fire, flood, cyclone, earthquake or any other natural cause, should be reported at once bythe departmental officer to the head of the department and by the latter to Government. When a fullinquiry as to the cause and extent of the loss has been made, the detailed report should be sent by thedepartmental officer concerned to the head of the department, a copy of the report or an abstract

C thereof being simultaneously forwarded to the Chief Accounts Officer concerned.

RESPONSffiILITY FOR LOSSES, ETC.

25. Every Government officer should realise fully and clearly that he will be held personallyresponsible for any loss sustained by Government through fraud or negligence on his part and that hewill also be held personally responsible for any loss arising from fraud or negligence on the part ofany other Government officer to the extent to which it may be shown that he contributed to the lossby his own action or negligence. Detailed instructions for regulating the enforcement of suchresponsibility are embodied in Appendix-I.

WRITE OFF OF LOSSES ETC.

26. The powers delegated to different authorities to write off the irrecoverable value of publicmoney or stores lost through fraud or negligence of individuals or other causes are indicated inChapter 4. Provision for losses should not ordinarily be made in the budget. If, however, the nature ofthe work of a department is such that some losses must be regarded as inevitable each year, provisionmay be made with the special sanction of the Finance Division in each case.

VI-DEPARTMENTAL REGULATIONS

27. All Departmental regulations in so far as they embody orders or instructions of a financialcharacter or have important financial bearing should be made by, or with the approval of, the Finance

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CHAPTER 3 0

REVENUE AND RECEIPTS

I-GENERAL

28. Subject to any special arrangement that may be authorised by competent authority with respectto any particular class of receipts, it is the duty of the departmental controlling officers to see that allsums due to Government are regularly and promptly assessed, realised and duly credited in the PublicAccounts. They should accordingly arrange to obtain from their subordinates monthly accounts andreturns in suitable form claiming credit for so much paid into the Bank or otherwise accounted forand compare them with the statements of credits furnished by the Accounts Officer to see that theamounts reported as collected have been duly credited in the Public Accounts.

If wrong credits thus come to the notice of the Controlling Officer, he should at once inform theAccounts Officer with a view to the correction of the accounts. If any credits are claimed but notfound in the accounts, inquiries should be made first of the responsible departmental officerconcerned.

Note 1: For this purpose each Accounts Officer will send to the departmental controlling officer extract from hisaccount showing the amounts brought to credit in them in each month.

Note 2: It is essential that the departmental accounts of revenue should not be compiled from the returnsprepared by the Accounts Office. But the Accounts Officer may be required, where necessary, to verify the i\returns prepared for submission to the departmental controlling authority. iV

Note 3: In order to minimise the differences between the figures of Accounts Office and the departmentalfigures, it is essential that the Chalans with which money is remitted to the Bank should bear full and correctaccounts classification.

29. Detailed rules and procedure regarding assessment, collection, remission etc., of revenue shouldbe laid down in the departmental regulations of the revenue and collecting departments concerned.

Note: In departments in which officers are required to receive moneys on behalf of Government and issuereceipts therefor in Form T.R. 5, the departmental regulations should prescribe the procedure and rules for themaintenance of a proper account of the receipt, and issue of the receipt books, the number of receipt books to beissued at a time to each Officer and check with the Officer's accounts of the used books when returned.

30. No amount due to Government should be left outstanding without sufficient reason, and whereany dues appear to be irrecoverable the orders of competent authority for their adjustment must besought.

31. Unless specially authorised by any rule or order made by competent authority, no sums may becredited as revenue by debit to a suspense head: the credit must follow and not precede actualrealisation.

32. Heads of departments in charge of important sources of revenue should keep the InternalResources Division and the Finance Division fully informed of the progress of collection of revenueun~er their control and of all important variations in such collections as compared with the Budget i \estImates. , 1

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-,--~c General Financial Rules

11- SPECIAL RULES FOR PARTICULAR CLASSES OF RECEIPT

0 RENTS OF GOVERNMENT BUILDINGS, LAND ETC.

33. The detailed rules and procedure regarding the demand and recovery of rents of Governmentbuildings and lands are contained in the departmental regulations of the departments in charge ofthose buildings.

When the maintenance of any rentable building is entrusted to a civil department other than thePublic Works Department, the head of the department concerned will be responsible for the duerecovery of the rents thereof. The procedure for the assessment and recovery of the rents of suchbuildings will be regulated generally by the rules applicable to residences under the direct charge ofthe Public Works Department.

FINES

34. It is the duty of every court or authority having the power to fine to see that the money realisedreaches the Bank and that adequate precautions are taken against double refunds of fines or refundsof fines not actually paid into the Bank.

35. The duty of realizing fines and of checking the receipts and refunds rests with the departmentalofficers. Each court, civil or criminal, is required to submit to the District Judge or to the DistrictMagistrate as the case may be, on the last working day of each calendar month, a statement in theprescribed form showing the demand, collection and balance of fines levied and written off by it aswell as of the refunds therefrom, the statement being made up for the account month of the District

C Accounts Officer or Thana Accounts Officer with which the court deals. The District Judge and the., District Magistrate should each consolidate these returns into a monthly fines statement for the courts

under him and for his own and forward it to the Accounts Officer as soon as possible after thebeginning of the month, for verification of the amounts shown as remitted into the Bank with thecredit appearing in the account of the Accounts Officer. The Accounts Officer should certify to thecorrectness or otherwise of these amounts. Where there is any discrepancy between a consolidatedstatement and the accounts of the Accounts Office, the Accounts Officer may, if necessary, beforegiving his certificate, request the District Judge or the District Magistrate, as the case may be, toexplain the discrepancy.

Note 1: The statement should exhibit the amounts under relevant classification codes. Compensation fines dueto an injured party which are creditable to deposits and fines which under the orders of competent authority arecreditable to a Municipal or Local fund, should be excluded from this statement.

Note 2: When fines are received in another district, an intimation should be given by the recovering officer tothe officer concerned, who should note the fact in his monthly fine statements.

MISCELLANEOUS DEMANDS

36. Realisation of miscellaneous demands of Government not falling under the ordinary revenueadministration will be watched by the Chief Accounts Officers concerned. Such are contributionsfrom Local Funds, Contractors and others towards Establishment charges; etc.

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III -REMISSIONS OF, AND ABANDONMENTOF CLAIMS TO, REVENUE :J

37. The sanction of the competent authority is necessary for the remission of, and abandonment of l

claims to revenue. All proposals affecting receipt of the Government are to be referred to the FinanceDivision.

Note: The powers of subordinate authorities to sanction the write-off of loss of revenue are indicated in theDelegation of Financial Powers.

38. Heads of departments should submit annually on the first of September to the Chief AccountsOfficer concerned statements showing the remissions of revenue and abandonment of claims torevenue sanctioned during the preceding year by competent authorities. For inclusion in thesestatements remissions and abandonments should be classified broadly with reference to the groundson which they were sanctioned and a total figure should be given for each class. A brief explanationof the circumstances leading to the remission should be added in the case of each class.

Subject to any general or special order issued by Government, individual remissions below anyamount prescribed by the Government need not be included in this statement.

Note: This rule does not apply to Railways, Postal Department and Telegraph and Telephone Board.

IV -AUDIT OF RECEIPTS

.39. When the audit of the receipts of any department of Government is entrusted to the AuditorGeneral, it will be conducted in accordance with regulations reproduced in Appendix 2. 0

Note 1: The procedure in respect of particular classes of receipts, e.g., stamps, opium, foreign servicecontributions etc., will be governed by special orders issued by Government.

Note 2: The audit of receipts accruing under Debt and Remittance and those included in the subsidiary accountsof Government commercial undertakings devolves on the Auditor General and is conducted in such manner andto such extent as may be prescribed by him.

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Cj CHAPTER 4

POWERS OF SANCTION

I- POWERS OF VARIOUS AUTHORITIES INTHE MATTER OF SANCTIONING EXPENDITURE

GENERAL

40. The responsibility for financial operations of the Government as also for the exercise of allexecutive authorities rests on the President whose sanction, given either directly or by persons towhom the necessary power has been delegated, is necessary to all expenditure from the revenues ofthe Government. The extent to which powers to sanction expenditure have been delegated to variousauthorities is indicated in the following paras.

The financial powers of subordinate authorities in certain departments e.g. Railway etc. areregulated by schedules of powers relating to these departments and by general orders issued with theconcurrence of the Finance Division which are embodied in the respective departmental regulations.

POWERS OF SUBORDINATE AUTHORITIES IN BANGLADESH

41.. The Government has delegated financial powers in respect of non-development expenditure tothe Ministries and Divisions so that they can carry out their responsibilities in financial matters with

, minimum references to the Finance Division. The Government has also prescribed specific financialmatters (non-development) which have to be referred to the Finance Division by the various

C MinistriesIDivisions. All other financial matters can be disposed of by AdministrativeMinistriesIDivisions themselves according to the provisions laid down i~ various codal rules,instructions and orders issued from time to time subject to the availability of funds in the relevantsanctioned budget. Office memorandum No. MF (EC-l) DP-6/83/378 issued on 15 August 1983 bythe Finance Division provides delegation of financial powers, subject to amendments issued fromtime to time. .

42. The Government has- prescribed a Model of Sub-delegation of Financial Power (Non-development) to ensure uniformity of sub-delegation of financial power by Ministries/ Divisions totheir attached Departments and subordinate offices. The Administrative MinistriesIDivisions areresponsible for issuing necessary orders on sub-delegation of financial power on the basis of thisModel. Keeping in view the special needs of certain attached departments of someMinistriesIDivisions financial powers in excess of what have been prescribed in the Model may bedelegated to them under special orders of the Finance Division. Office memorandum No. MF (EC-l)DP -4/85/158 issued on 29 July 1985 by Finance Division provides the Model subject to amendmentfrom time to time.

43. The Government prescribes from time to time separate schedules of delegation of financialpower to MinistriesIDivisions, Heads of Departments and Project Directors of different categories ofdevelopment projects to ensure smooth project implementation. The Government also determines listof items of development expenditure which requires concurrence of the Finance Division.MinistriesIDivisionslHeads of Departments/Project Directors are empowered to delegate financialpowers vested in them to their subordinate authorities/officers under intimation to the FinanceDivision. Office memorandum No. FM/FDIDEV/Research Section/94/339 issued on 12 April 1994by Finance Division provides delegation of financial powers for development projects subject to

~i amendment from time to time.~

44. Unless otherwise provided by any special rule or order of Government, a higher authority mayexercise the powers delegated to an authority subordinate to it.

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II- POWERS IN REGARD TO CERTAIN SPECIAL MATTERS

GRANTS OF LAND, ASSIGNMENTS OF r)REVENUE AND OTHER CONCESSIONS ETC. \ 45. No department or authority may, without previous consent of the Finance Division issue anyorders (other than orders in pursuance of general delegation made by or with the approval of the

Finance Division) which -

(1) involve any grant of land, or assignment of revenue, or concession, grant, lease, or license

of mineral or forest rights or right to water, power, or any easement or privilege in respect of

such concessions; or

(2) in any way involve any relinquishment of revenue.

Note: The powers to execute instruments are governed by the Rules of Business and other departmentalorders on the subject.

WRITE -OFF OF LOSSES

Note: The orders in the following paras do not apply to the Defence and the Railway Departments whosepowers in the matter of write off of losses are regulated by special orders incorporated in the departmental

regulations.

46. (1) Subject to the limits and conditions specified in the Delegation of Financial Powers, a

competent authority may sanction the writing off finally of the irrecoverable value of stores or public

money lost by fraud, negligence of individuals or other causes, provided that -0

(i) the loss does not disclose a defect of system the amendment of which requires the orders

of higher authority; and

(ii) there has not been any serious negligence on the part of some individual Government.officer or officers which may possibly call for disciplinary action requiring the orders of

any higher authority.

These orders apply also to the writing off of losses of revenue, irrecoverable loans and advances

and of deficiencies, depreciation etc., in the value of stores included in the stock and other accounts.

(See also Para. 172)

Note 1: The question of writing off will arise only when the value of stores or public money lost by fraud ornegligence of individnals etc., is found ultimately to be irrecoverable. The first step should always be to fixresponsibility for the loss with a view to recovering from the persons responsible, the value of the stores etc.,lost.

Note 2: The expression 'Value of Stores' used in this sub-para should be interpreted as meaning 'Book Value'where priced accounts are maintained and 'Replacement Value' in other cases.

(2) All sanctions to write off should be communicated to the concerned Chief Accounts

Officer for scrutiny in each case and for bringing to notice any defect of system which requires

attention.

Note: Sanctions to the writing off of irrecoverable balances of income-tax demands accorded by competent 0authorities need not be communicated to the Accounts Officer concerned.

Irrecoverable balances of income-tax demands written-off by competent authorities should, however,

be included in the statement required to be submitted to the Chief Accounts Officer under Para 38.

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47. The orders contained in the last preceding para, do not apply to loss of cash in banks whether inthe course of remittance or out-of cash balance, small coin depot or currency chest. Individual cases

C\ of such losses should be reported to the Finance Division and its specific approval obtained beforeU any item can be written-off in the accounts of the Government;

Note: It has been decided with the concurrence of the Auditor General, that, in general, losses sustained by theGovernment through the negligence"or culpability of the staff paid for by the Government should be borne bythe Government.

In cases where recoveries are made in cash, e.g., by deductions from payor otherwise, from the personsresponsible for a loss, the entire amou"t recovered should be credited to the Government. Recoveries madeindirectly, e,g. by stoppage of increment or promotion as a measure of punishment, should not be treated asrecoveries made in cash.

REMISSION OF DISALLOWANCES BY AUDIT AND WRITING-OFF OFOVERPAYMENTS MADE TO GOVERNMENT SERV ANTS

48. (1.) Ministries and Divisions of the Government, may, for reasons to be recorded, waive therecovery of an amount disallowed by an Audit Officer or otherwise found to have been overpaid to aGovernment servant, if-

(a) the amount disallowed has been drawn by the Government servant concerned under areasonable belief that he was entitled to it;

(b) the enforcement of the recovery will, in'the opinion of the competent authority, causeundue hardship, or it will be physically impossible to effect the recovery; and

0 (c) in the case of disallowance of emoluments of the nature of pay as defined inFundamental Rule 9 (21.), made within one year of the date of payment -

(i) the Government servant is not in receipt 9f pay exceeding amounts to bedetermined by the Government or, in the case of others, the overdrawal has notthe effect of raising the Government servant's pay beyond prescribed amount;and

(ii) the overdrawal has not been occasioned by delay in notifying a promotion orreverSion.

These powers may be exercised by the authorities to which the powers may be speciallydelegated by Government, provided that the yearly pay limit referred to in sub-clause (i)above does not exceed the prescribed amount in individual case.

(2) all sanctions to forego recovery under these orders should be communicated to theconcerned Chief Accounts Officer. It is open to the Chief Accounts Officer to require that the actiontaken in any case should be reported to the Finance Division for orders.

49. The powers delegated to Audit Officers to waive objection to, or to forego recovery of, irregularexpenditure in individual cases are laid down in paras. 248 to 250 of the Audit Code.

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III- COMMUNICATION OF SANCTIONS

50. Financial sanctions and orders of competent authorities under these or any other authorised 0rules, e.g., the Fundamental and Supplementary Rules, the Civil Service Regulations, the Provident;Fund Rules, the Pensions Rules, the Treasury Rules, the Public Works Department Code, the PublicWorks Account Code etc., will be communicated to the Chief Accounts Officer concerned inaccordance with the procedure set out below: -

(i) All financial sanctions and orders issued by a Ministry or Division within its ownfinancial powers as a Ministry or Division of the Government will be communicateddirect to the relevant Accounts Officers by the Ministry or Division concerned. All otherorders involving financial sanctions, which may be issued by Ministry or Division of theGovernment, i.e., sanctions beyond their financial powers will be communicated to theAccounts officer concerned through the Finance Division.

(ii) Sanctions and orders of any other authority to which the power of sanction has beendelegated will be communicated to the Accounts officer by that authority.

(iii)In cases referred to in clause (i) above, if an order sanctioning expenditure is sent to theAccounts officer direct by a Ministry or Division and that Ministry or Division is notcompetent to sanction the expenditure, the Accounts Officer will request the Ministry orDivision that the sanction be communicated to him through the Finance Division.

(iv) If an order or sanction has been issued with the concurrence of the Auditor General, thefact should be mentioned in the endorsement to the Accounts officer.

(v) In all orders conveying sanctions to expenditure of a definite amount or up to a specified 13limit, the amount of sanction should always be expressed both in words and in figures.

(vi) all letters or orders conveying sanctions to expenditure, appointment, etc., must be signedby an authorised gazetted officer.

Note: In cases in which the documents relating to any sanction or order are deemed secret, the AccountsOfficer will accept a statement of fact signed by an authorised official in lieu of those documents.

51. All orders conveying sanction to the grant of additions to pay, such as special pay andcompensatory allowance, should contain a brief but clear summary of the reasons for the grant of theaddition so as to enable the Accounts officer to see that it is correctly classified as special payorcompensatory allowance, as the case may be. In cases in which an official record in an open letter isconsidered undesirable, the reasons for the grant of such additions to pay should be communicatedconfidentially to the Accounts officer. A similar procedure should also be followed in all other casesin which the rules require that reasons for the grant of special concessions or allowances should berecorded.

52. Sanctions accorded by competent authority to grants of land and alienation of land revenue,other than those in which assignments of land revenue are treated as cash payments, should becommunicated to the Accounts officer in a consolidated monthly return giving the necessary detailsto enable him to examine the sanctions accorded.

53. When proposals for a new grant-in-aid are pla~~d, details .sho~l~ be furnished showing the /~purpose of the grant and the exact nature of the condItIons on whIch It IS proposed to be made. The JAccounts Officer shall compare such proposals and conditions with those enumerated by thesanctioning authority in its subsequent orders of sanction.

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IV -INDICATION OF THE SOURCE OF APPROPRIATIONS IN THESANCTION TO EXPENDITURE

0 54. In all applications for sanction to expenditure it should be distinctly stated whether provision for

the proposed charge has, or has not, been made in the budget estimates of the year, and, if it has notbeen made, whether the funds can be found by valid re-appropriation.

55. Authorities which sanction new expenditure after the appropriation of funds have beencommunicated, should be careful to indicate the source of appropriation.

Where it is desired to sanction expenditure before the appropriation of funds have beencommunicated, as may be necessary in order to avoid delay in starting work at the beginning of a newfinancial year (vide Para 95), or to prevent duplication of orders, the authority which does so shouldbe careful to add the words "subject to the appropriation of funds being communicated in the budgetof the year".

Note: Vague expressions, such as, "subject to budget provision" should be carefully avoided in conveyingsanctions to expenditure.

V-DATE OF EFFECT OF SANCTION

56. Unless otherwise indicated specifically in the order conveying the sanction, a sanction issued bya competent authority has effect from the date of orders conveying the sanction.

In all cases, these orders are subject to the general order contained in the Delegation ofFinancial Powers regarding appropriation of funds and to any special provisions as to the date of

.effect in the rules, orders or sanctions themselves.

Ci Note: Orders sanctioning the creation of temporary posts should, in addition to the sanctioned duration of thepost, invariably specify the date from which it is to run whetlt,er it be the date of entertainment or otherwise.

VI- RETROSPECTIVE SANCTION

57. (1) All authorities which are competent to sanction revision of payor the grant of concessionsto Government servants should bear in mind that retrospective effect should not be given to financialsanctions, except in exceptional circumstances, without the special approval of Government.

(2) In the absence of special reasons to the contrary, concessions regarding rates of pay for anyclass of Government servants should take effect as from the first of July and not from some date inthe middle of a financial year.

VII -LAPSE OF SANCTION

58. A sanction for any fresh charge which has not been acted on for a year must be held to havelapsed, unless it is specifically renewed.

Note: This order does not apply to a case where an allowance sanctioned for a post or a class of Governmentservants has not been drawn by a particular incumbent or incumbents, nor does it apply to additions madegradually from year to year to a permanent establishment under a general scheme which has been sanctioned by

competent authority.

VIII- SPECIAL RULES FOR WORKS EXPENDITURE

0 59. Special rules for regulating administrative approvals and sanctions to expenditure on works arecontained in the Public Works Department Code and other departmental regulations (See alsoChapter 9).

15


CHAPTERS 0BUDGET, GRANTS AND APPROPRIATIONS

I -PROCEDURE FOR PREPARATION AND SUBMISSIONOF BUDGET ESTIMATE.

(NON-DEVELOPMENT BUDGET)

GENERAL PROCEDURE

60. Under Article 87 of the Constitution, a statement of the estimated receipts and expenditure ofthe Government for each financial year has to be laid before the Parliament. The Constitution refersto this statement as "the Annual Financial Statement", and in common parlance it is called "theBudget".

61. The Annual Financial Statement consists of two main parts -the "Consolidated Fund" and the"Public Account of the Republic". Under Article 84(1) of the Constitution, the Consolidated Fundcomprises all revenues received and loans raised by Government as well as all moneys received by itin repayment of any loan. All other public moneys received by Government or on behalf of theGovernment are credited to the " Public Account of the Republic".

PREP ARA TION OF mE BUDGET

62. The Finance Division prepares the Budget and for this purpose other Ministries/ 0Divisions/Departments are required to furnish materials on which the estimates are to be based. Most -

of the Ministries/Divisions/Departments depend for these materials on local officers who collect therevenue or incur expenditure.

BUDGET MONITORING AND RESOURCE COMMITTEE

63. There exists a Budget Monitoring and Resource Committee in the Finance Division headed bythe Finance Minister. All the relevant Ministries/Divisions are represented in the Committee. TheCommittee monitors the budget on the basis of review of progress of revenue collection, inflow offoreign assistance, expenditure trend against the budget and all other pertinent issues. It alsoexamines the economic and fiscal impact of new measures for resource mobilisation and takescorrective actions. A Technical Committee in the Finance Division provides technical support to theBudget Monitoring and Resource Committee.

DATES OF SUBMISSION OF BUDGET ESTIMATES

64. (1) The time schedule for the preparation of Revised and Budget Estimates is given inappendix 3.

(2) The authorities by whom the different Revised and Budget Estimates are to be prepared,the authorities by whom these Estimates are to be submitted to the Finance Division and to theAccounts Officers concerned, and the authorities responsible for watching the progress of collectionand of expenditure against appropriation are indicated in two separate publications of the Finance r'\Division entitled "List of Authorities responsible for Watching the Progress of Collection" and "List \ Jof Authorities responsible for Control over Expenditure in each Demand for Grant".

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-."",.,,~"~""""~~-~? c"~" "C~""~"~'"t"""""~


(3) The Chief Accounts Officers will actively assist the Ministries/DivisionslDepartmentsconcerned in the preparation of the Budget and will intimate appropriate action, without waiting for a

Cj request for estimate from ~he Finance Divisio~. Lu~p sum provisions in the Budget :will n.ot beproposed or made except m the most exceptional circumstances, the reasons for which will berecorded in writing.

METHOD OF DRAWING UP ESTIMATES

65. The estimates of receipts and of ordinary charges prepared in district and departmental offices inOctober are checked and consolidated in the offices of the Accounts Officers concerned inNovember. They are then considered by the Finance Division in December and Janua,ry. In March,the Finance Division hold discussion with administrative MinistriesIDivisions and, on considerationof their points of view, finalize the first edition of the Revised and Budget Estimates. By 22ndJanuary each year the administrative MinistriesIDivisions submit Schedules of New Expenditure (i.e.,expenditure on items not included in the current budget) for inclusion in the ~ext years' b'Udget.'Subsequently, Government decide for what new expenditure provisions will be made in the budget ofthe ensuing financial year, the amounts being determined by a review of the funds available and ofthe proposals either initiated in the Secretariat or put forward by Heads of Departments in theirSchedules of New Expenditure.

NEED FOR PUNCTUAL SUBMISSION OF BUDGET ESTIMATES

66. liis of utmost importance that all officers will transmit their estimates on the dates prescribed inthe aforesaid schedule. It should be borne in mind that this programme allows only the minimumperiod necessary for scrutiny in the various controlling offices.

C) ESllMATES OF REVENUE AND RECEIPTS

67. The estimates will be prepared in quadruplicate. One copy will be kept for record in the office oforigin, the remaining copies being sent simultaneously to (a) the Accounts Officer concerned, (b)Finance Division, (c) the administrative MinistryIDivision concerned. Where the administrativeMinistryIDivision is itself responsible for the preparation of the estimates, only three copies will berequired, one copy being kept for record in the MinistryIDivision and the duplicate and triplicatecopies being sent simultaneously to the Accounts Officer concerned and the Finance Division.

REVISED ESTIMATES

68. (1) These estimates are intended to be the best possible forecasts of what the actual receipts ofthe current year will be. A very important guide to their preparation. will, therefore, ordinarily befound in the actual receipts of those months of the year which have already elapsed by the time whenthe estimates are being prepared. If an officer observes that the actual receipts from a particularsource of revenue reveal a growth or a diminution compared with those of the corresponding periodof the previous year, he will, other things remaining unchanged, be justified in tentatively assuming acontinuance of the growth or decline at the same rate during the remaining months. The proportionateestimate based on this assumption must, however, be modified by an intensive scrutiny of otherknown factors which affect the yield of the tax or receipt under consideration. For example, ananticipated increase or decrease in the volume of dutiable imports, excisable manufactures, or over-all economic activity in the remaining months of the year may suggest that the rate of growth ordecline in the relevant receipts will be accelerated or retarded. Seasonal variations, if any, in thecollection of specific receipts will also be borne in mind while using actuals for part of the year as a

C basis for the preparation of the revised estimate for the whole year. The proportionate estimate will,therefore, only be used by the estimating officer as one (albeit a very important one) among a numberof factors which influence his estimate. It must be noted, however, that it is rarely suitable for use inestimating land revenue and similar receipts, for which the demand is fixed, or such income as thosefrom the sale of land and houses, which necessarily fluctuate widely from year to year.

17


(2) Sanctioned budget estimates will not be used as a guide to the revised estimates, because inmost cases these are somewhat out-of-date by the time the revised estimates are being prepared.

( )(3) There will ordinarily be little difficulty in arriving at an accurate estimate of the '.~-./

expenditure of the year, when the experience of the earlier months is available as a guide. However,as in the case of revenue estimates, known special factors which have a bearing on the expenditureunder consideration have also to be taken into consideration in order to arrive at the revised estimatefor the year.

PURPOSE AND BASIS OF THE REVISED ESTIMATES

69. The revised estimates of expenditure are merely forecasts, based on the latest information, ofwhat the actual outlay of the year will be; they do not operate either to increase or to reduce thegrants which have been placed at the disposal of officers in the sanctioned budget. This is as true ofrevised estimates of Civil Works expenditure as of those of expenditure of other categories.

70. The actuals of preyious years ordinarily afford ~n important guide in framing the budgetestimates, and a continuance of any trend of growth or decline in income indicated by them may, inthe absence of definite reasons to the contrary, properly be assumed in all cases in which theproportionate estimate can be usefully employed.

71. In all cases and specially in dealing with important revenue estimates, the reasons underlying theproposed estimates will be briefly but clearly explained. This explanation will recount the particularcircumstances which, in the opinion of the estimating officers, have led to a recorded increase ordecrease in the revenue of the earlier months, and the grounds on which they expect to collect the,balance of the estimates in the later part of the year. This explanation will not, however, be merelymechanical. A statement, for instance, that the revised estimate is based on the income to date plusthat antic.ipated during the re~aining. mon~hs of ~h.e year is merely a~ arith~etical explanation and is 0of no assIstance to the controllIng officers m decidIng whether the estImate IS reasonable.

PURPOSE OF BUDGET ESTIMATES

72. (1) The Budget estimates serve two purposes:

(a) their primary function is to forecast the expenditure of the ensuing year, and thus to enableGovernment to make the necessary arrangements for financing the charges which it willbe called upon to meet; and

(b) as finally passed, they fix the allotments at the disposal of officers for expenditure in theensuing year.

(2) An over-estimate of expenditure under one item reduces the amount which can be treated asavailable for other items while an under-estimate of expenditure or the omission of items of outlaywhich are likely to be incurred can be remedied later only by postponement of other items ofexpenditure for which provision has been duly made. It is consequently of great importance thatexpenditure estimates should be accurately framed, programmes involving new expenditure shouldbe carefully worked out before the Budget Estimates are forwarded and no admissible charges whichare likely to be incurred should be omitted.

ESTIMATES OF EXPENDITURE TO BE IN TWO PARTS

73. In the preliminary stages with which heads of offices and of Ministries/Divisions are concerned,the expe,nditure estimates are divided into two parts, viz.:

(a) the estimates of ordinary charges which are transmitted to the Finance Division, the Accounts (~Officer concerned and the administrative Ministry/Division in prescribed forms; and(b) the estimates of new expenditure, i.e., expenditure on items which do not appear in the currentbudget.

18


PREPARATION OF ESTIMATES OF EXPENDITURE

() 74. (1) The budget estimates of expenditure to be prepared in district and departmental officesmust be rigidly confined to ordinary charges and to charges which, although not yet being incurred,have been approved for introduction in the ensuing financial year. They must not include provisionfor any new unsanctioned item which it is desired to be introduced in the ensuing financial year.

(2) Proposals for new expenditure on items which it is desired to introduce in the ensuingfinancial year should be submitted by the administrative Ministries IDivisions to the Finance Divisionin the form of Schedules. The preparation of these schedules is governed by the procedures containedin Para 75 to 78.

(3) Article 87 (2) (a) of the Constitution requires that the estimates of expenditure embodied inthe Annual Financial Statement will show separately the sums required to meet expenditure chargedupon the consolidated Fund. A list of expenditure charged upon the Consolidated Fund is given inAppendix 4.

(4) Provision is made in the estimates of ordinary charges for sanctioned charges onlyincluding those for which direct budget provision has been authorised by the Finance Division.

(5) In justification of the estimates under "Pay of Officers" and "Pay of Establishments" fulldetails of the number of officers and their pay together with the number and pay of the permanent andtemporary establishments will be separately supplied with the estimates in the Form G.F.R 1. In thecase of temporary establishments, the last Government order will also be quoted.

.-(6) The budget estimate of charges, such as travel expenses, the amount of which tends to vary

( from year to year, will be based on the actual of previous years; and, in default of reasons to thecontrary, it is ordinarily advisable to assume a continuance of any growth or decline which isindicated by these figures.

(7) The estimates of ordinary charges will exclude the value of stores proposed to be obtainedfrom abroad for which an indent has already been submitted to the Government.

SCHEDULES FOR NEW EXPENDITURE PROPOSEDFOR INCLUSION IN THE BUDGET

75. (1) In the first week of December each year, reminders will be issued by the Budget Wing ofthe Finance Division to all the Administrative MinistrieslDivisions of the Secretariat, pointing outthat their Schedules are due, in triplicate, by the 22nd January. No schedules will be received by theFinance Division after that date except under special orders of the Finance Minister.

(2) The Schedule prepared by the Administrative MinistrieslDivisions in' the Form shown inForm G.F.R.2 will be approved by the Secretary of each MinistrylDivision and will be sent to theFinance Pivision in triplicate arranged in order of urgency, under the orders of the Minister.

(3) Against each item in the consolidated schedule, the Administrative MinistrylDivision willrecord, in the appropriate column, the number and date of the Government letter approving thescheme and a very brief note indicating the exact stage of the proposed scheme to enable the FinanceDivision to judge whether the scheme is so far advanced as to render it probable that the whole or any

1 C \ part of the expenditure proposed can actual~y be incurred in the ensuing year. Th~ note will s.tate the.I

) ba~kgro~nd of t~e case and also. ",:heth~r It cannot be postponed or dropped wIthout creatmg anyserious mconvemence to the AdmImstration.

i

19


(4) On receipt of the Schedules, the Budget Wing will examine them at once to see if any ofthe instructions issued with regard to their preparation have been contravened. Those found in orderwill be accepted. Defective Schedules requiring modification will be corrected where possible or will (/

)be returned to the office of origin with a brief note over the signature of Deputy Secretary or ,,_.Assistant Secretary, indicating the exact nature of the defect, with a request to return them afternecessary amendment.

(5) As soon as possible after the preliminary scrutiny contemplated in clause (4), one copy ofthe Consolidated Schedule will be sent to the press to be set up in type and the other copy will beexamined by office which will confine its note to the probability of the proposed expenditure beingincurred in full in the ensuing year.

(6) It is of great importance that all schedules returned to the office of origin under clause (4)above will be received back by the Finance Division by the due date. After the ConsolidatedSchedules have been duly corrected those will be printed by the Finance Division for considerationby the Cabinet/Council of Ministers.

(7) To ensure that all items of new expenditures for which it is desired to make provision in theBudget are included in the schedules prepared by the Administrative MinistriesIDivisions, AssistantSecretaries of these MinistriesIDivisions will maintain registers in which they will enter, at the timeof receipt, all proposals which may involve new expenditure in the following year, irrespective ofwhether the proposals have been received unofficially, demi-officially or officially. When a proposalhas been rejected, the entry relating to it will be struck out.

SCHEDULES OF NEW WORKS PROPOSED FORINCLUSION IN THE CIVIL WORKS BUDGET

76. (1) By the 31st August each year the Ministry of Housing and Public Works will obtain from \'~)

the Administrative MinistriesIDivisions lists of works that have been administratively approved andfor which the office concerned desires that provision should be made in the estimates of the nextfinancial year. The works in each list will be arranged in order of urgency. Where some time haselapsed since administrative approval was accorded to a work, the administrative MinistryIDivisionwill consider whether fresh approval is likely to be necessary owing to increased costs or for otherreasons and, if necessary, steps will be taken in the meantime to have the work re-approved. TheMinistry of Housing and Public Works will prepare detailed estimates for the schemes. The cost asdetermined by the detailed estimates as well as the probable expenditure on each scheme in theensuing year will be furnished in triplicate to the Finance Division by the Ministry of Works not laterthan the 22nd January.

(2) It will be remembered that works already included in the estimates of the year are treated,for the purposes of the estimates of the ensuing year, as works in progress, even if construction hasnot been taken up, that provision for them is made by the Ministry of Housing and Public Works intheir departmental estimates, and that consequently they must not be included in any list of newworks.

ESTIMATES OF NEW EXPENDITURE ON WORKS

77. The estimates of new expenditure on works are submitted by the administrativeMinistriesIDivisions in lists as shown in the Form GFR-3. They will reach the Finance Division notlater than the 22nd January in each year, and the orders with regard to their preparation are as ~follows: (,J

(a) The lists will be submitted in triplicate;

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(b) No work will be included in the list for which provision has been made in the budget forcivil works for the current year, even if construction has not begun at the time of the submission

( of the list or is not likely to be taken in hand during the year. Provision for such works will be~J made, if necessary, by the Ministry of Housing and Public Works in their estimates as for works

in progress;

(c) No work will be included in the lists of works which have not received administrativesanction;

(d) No important work will be included in the list of works unless detailed plans and estimateshave already been technically sanctioned in the Ministry of Housing and Public Works, or are sofar advanced as to ensure that they will be technically sanctioned before the commencement ofthe next financial year;

(e) No proposal regarding a work, which has not been included in the list of works submitted bythe 22nd January, or which does not fulfil either or both of the conditions under sub-paragraphs(c) and (d), will be accepted after the end January, in each year, unless it is shown that the workis of such extreme urgency that it cannot possibly wait for inclusion in the subsequent year'sbudget; and

(f) Care will be taken to see that all works are entered in order of urgency. In determining theprojects to which the available funds will be allotted, Government will be guided by therecommendations of Heads of Ministries/Divisions in this matter provided there is reasonableprobability of the projects being commenced in the ensuing financial year.

ESTIMATES OF OTHER NEW EXPENDITURE

C 78. The estimates of other new expenditure are submitted in the Form GFR-2 in accordance with the

following orders:

(a) The Schedules are submitted in triplicate by the Administrative Ministry/Division to theFinance Division not later than the 22nd January in each year. They will contain all newcharges for which it is desired to provide funds in the ensuing years, other entries in theschedules wiU be confined to measures which have, after examination by the Finance Division,been approved by Government and no item will be entered, unless proposals for its introductionhave been sent to Government in the Administrative Ministry/Division in good time to enablethem to send in their recommendations to the Finance Division for examination prior to the 22ndJanuary;

(b) No proposal for new expenditure, which has not been included in the Schedule of NewExpenditure, will be accepted after the 22nd January in each year unless it is shown that thescheme is of such importance that it cannot possibly wait for inclusion in the subsequent year'sbudget; and

(c) The schedules are prepared in the Form GFR-2. The items will be entered in order ofurgency, and in the last column of the form a reference will invariably be given to the numberand date of the latest communication to or from Government relating to the proposals.

79. No schedules need be prepared for individual minor works for which lump provisions are madein the Civil Works budget. If an administrative Ministry/Division is of the opinion that the lump sum

C allotted each year for minor works is inadequate, a schedule in the Form GFR-2 showing theproposed increase in the lump provision, will be sent to the Ministry of Finance not later than the22nd January each year.

21


PREPARATION OF CIVIL WORKS ESTIMATES

80. (1) The estimates will be submitted in sample form GFR 4.

(2) Supporting the entries against "Works in Progress" in the form GFR 5, a statement in theform shown in GFR 4 will be forwarded to the Finance Division. The information to be given in thisform will be obtained from the reports of Executive and Superintending Engineers, and it will be seenthat the instructions for filling up the Form are clearly understood by them and are exactly followed.

(3) On the 15th February each year, a similar Form based on reports from Executive andSuperintending Engineers, and containing up-to-date information then available as to the amountlikely to be spent on works in the current financial year, will be submitted to Government through theAccounts Officer. The date for the submission of this supplementary statement will be most carefullyobserved, since it will be of no use unless it is received in good time.

(4) In issuing these and any subsidiary instructions to Executive and Superintending Engineers,it will be pointed out to them that the revised estimates which they submit of the expenditure they arelikely to incur on works, do not operate to reduce the sanctioned grant for those works. It is their dutyto assist the Financial Officers of Government by giving as accurate an estimate as possible, not ofthe amounts which they want to spend but of the amounts which they can actually spend in thecurrent year, taking into consideration the pace at which work is going forward, the difficulty orotherwise in respect of labour, materials, etc.

(5) In framing the revised estimate of repairs, the remarks made in instructions at Para 68should be borne in mind. For the budget estimate of repairs, the revised estimate with necessary

.additions for repairs to new works executed in the course of the year will ordinarily be the safestguide. J

(6) Past actuals will ordinarily be the best guide for the revised estimate of establishmentcharges; and past actuals and the revised estimates will ordinarily be the best guide for the budgetestimate. In both the cases, allowances will be made for any increase or reduction in the charges dueto any revision of the number or pay of the establishment which may have taken place in the year towhich the revised estimate relates.

DISPOSAL OF BUDGET REFERENCE

81. (1) Immediately on receiving from the Accounts Officer concerned, the form containing theactual and the estimates proposed by the local officers, the Finance Division will send to the press acopy of it to be set up in types and utilise another copy for framing the revised and budget estimates.All relevant papers will be placed on the file, these being obtained, if necessary, from theAdministrative Ministries/Divisions concerned.

(2) A copy of the estimates as framed by the Finance Division together with the relevant notes,where necessary, will be sent as soon as possible to the Administrative Ministry/Division concernedfor their comments on specific points raised in the notes. They will also be required to point outerrors and omissions, if any, in the estimates framed by the Finance Division.

(3) On receipt of these references, the Administrative Ministry/Division will supply theinformation required by the Finance Division and also point out errors and omissions, if any, thereferences of the Finance Division being returned without fail within three days from the date of theirre~~i~t in the Administrative Ministry/Division. It should be clearly understood that no general ~CritIcIsm of the references from the Finance Division is necessary and that the notes of the -Administrative Ministry/Division should be confined to really important issues.

22

-,


(4) If the references are not received back within the time allotted, which must be regarded asthe maximum, the Finance Division will at once proceed to decide the doubtful points, as it is ofparamount importance that the time-table drawn up for the compilation of the Budget Estimate willbe rigidly followed.

DISCUSSION WITH ADMINISTRATIVE MINISTRIES

82. The estimates framed by the Finance Division are discussed with representatives of theAdministrative MinistriesIDivisions!Departments at a round of meetings held in the Finance Divisionin the month of March. At these meetings, the estimates are reviewed in the light of the latestavailable facts and data, including the latest figures of actual expenditure and receipt, which therepresentatives of the Administrative MinistriesIDivisions! Departments are expected to furnish.These meetings thus afford them an opportunity for making a coherent presentation of the reasons infavour of budgetary provisions which they consider to be necessary. The authority for modifying, ifnecessary, the estimates earlier framed, however, rests with the Finance Division.

83. The estimates of expenditure embodied in the Annual Financial Statement laid before theParliament under Article 87 of the Constitution are understood to represent Government's fullrequirements for the financial year, and nothing but pressing emergencies that cannot beaccommodated within the provision available will occasion the presentation to the Parliament ofdemands for further funds or of estimates of further charged expenditure.

84. Demands for Supplementary Grants will not be made, except in extraordinary circumstances, forwhich full justification will be furnished to Finance Division including an explanation for the failure

, to foresee the additional expenditure at the time of submitting proposals for budget provision. No

expenditure will be incurred in anticipation of the authorisation of a Supplementary Grant, withoutthe prior concurrence of the Finance Division. The procedure in the Parliament in connection withSupplementary Estimate will be the same as in the case of the Budget proper.

85. The responsibility in regard to proposals for Supplementary Estimates rests in the first place onthe Principal Accounting Officer of every MinistryIDivision (i.e., the Secretary of theMinistryIDivision) who will be in a position to explain clearly not only why a supplementaryappropriation is required but also why the need for funds was not foreseen when the originalestimates were framed. The greatest care will be taken by the Administrative MinistriesIDivisions insubmitting proposals for Supplementary Estimates. If, on the closing of the accounts, anysupplementary appropriations actually obtained are found to have been unnecessary or excessive, theAudit Office will draw attention to the fact in the Audit Report on the Appropriation Accounts andthe action of the Ministry! Division will attract the criticism of the Public Accounts Committee.

86. When an unavoidable need for additional funds arises in the midst of the year for a purpose notprovided for in the current Budget, or a purpose for which the existing Budget provision has beenexhausted, the Administrative MinistryIDivision will send a self-contained proposal to the FinanceDivision well in time. In this proposal, besides giving justification for the proposed additionalexpenditure and the reason why it could not be foreseen earlier and provided for in the originalBudget, the administrative Ministry! Division will also give (a) the recurrent expenditure, if any, thatwill have to be admitted in future years if the proposal is accepted and (b) an analysis of the BudgetGrant to which the expenditure is debitable indicating, inter alia, the expenditure already incurredunder the various items and the reasons why the proposed expenditure cannot be partly or whollyaccommodated within the balance of the provisions under these items by effecting appropriate

( economy. The Finance Division will, in the first place, examine the proposal in respect of its~ justification and magnitude and thereafter allocate the additional funds considered admissible and

feasible. While communicating their decision to the Administrative MinistryIDivision, the FinanceDivision will indicate whether the funds are being allocated from the budget provision for

23


"Unexpected Expenditure" or whether they will in due course be provided either by re-appropriationor by Supplementary Grant. The Administrative Ministry/Division will thereafter issue the requisiteexpenditure sanction with the concurrence of the Finance Division by whom a copy thereof is to be )endorsed to the Chief Accounts Officer concerned.

II- PROCEDURE FOR PREPARATION ANDSUBMISSION OF BUDGET ESTIMATE

(DEVELOPMENT BUDGET)

GENERAL PROCEDURE

87. The preparation of the Annual Development Programme depends on cooperation from allMinistries and specially the executing agencies. Each one involved should be aware of what iswanted to be achieved by the development programme and should know how to go about it. Everyyear the Planning Commission issues guidelines for preparation of the proposed and revised AnnualDevelopment Programme.

88. A Programming committee constituted in the Planning Commission with participation ofFinance Division, Economic Relations Division and Implementation, Monitoring and EvaluationDivision examines development project proposals, fix their priorities and determine the allocations tobe provided in the Annual Development Programme. The committee undertakes a review of theAnnual Development Programme beginning the middle of November each year to finalise the revisedAnnual Development Programme and make the first projection of the Annual DevelopmentProgramme for the following year. The committee finalises its recommendations for AnnualDevelopment Programme in the month of April each year for consideration by the PlanningCommission and presentation to the National Economic Council. Project proposals for inclusion in '\the Annual Development Programme are formulated, processed and approved in accordance with ' )procedures prescribed by the Planning Commission from time to time.

REVISED ESTIMATE

89. On completion of discussion on the Revised Annual Development Programme in the PlanningCommission with representatives of the Administrative MinistriesIDivisions and the FinanceDivision, the Estimates are finalised. Particulars of each approved project/ scheme included in theRevised Annual Development Programme, showing Revenue and Capital components with thebreakdown and estimated receipts, if any are furnished to the Finance Division for incorporation inthe Budget.

BUDGET ESTIMATE

90. After the Annual Development Programme is finalised, particulars of each developmentproject/scheme included in the Programme, showing the Revenue and Capital components andreceipts, if any, are furnished to the Finance Division by the respective AdministrativeMinistriesIDivisions for incorporation in the Budget.

91. The Finance Division then classify the allocation for the project/scheme according to theClassification Chart for incorporation in the Budget and submission before the Parliament.

92. The project-~ise estimates ?f expen~it~~e of projects/sche~es c~~pl~ted d.u~i~g the last fis.cal ~year are also furnIshed to the Fmance DIvIsIon by the respectIve MmistnesIDIvisions for makIng --}necessary budget provision in the non-development budget.

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~~"",~~,.,..,~ "


III -COMMUNICATION AND DISTRIBUTION OF GRANTS

93. (1) The grants voted by the Parliament, together with any sums sanctioned for non- votable(charged) expenditure will be communicated by the Finance Division to the Administrative Ministriesand the Chief Accounts Officers concerned in the shapes of lump sums known as primary units ofappropriation. The Administrative Ministry will then make arrangements for distributing thesanctioned funds, where necessary, among the controlling and disbursing officers subordinate to themin accordance with instructions laid down in clause (2) of paragraph 98. The Chief Accounts Officerwill render such assistance in the distribution of grants as may be settled in each case.

(2) Subject to any special rules or orders of Government, the distribution of grants shouldusually be effected as under :-

(i) The whole or part of the appropriation for an operating unit may be placed at thedisposal of a controlling or a disbursing officer or the operating unit may be broken upinto a number of secondary units and the appropriation for any of these, wholly or inpart, may be placed at his disposal.

(ii) A controlling officer at whose disposal an appropriation for an operating unit or asecondary unit has been placed, may out of it, allot funds for expenditure on a specificitem or on group of items.

(iii)Any distribution of appropriation among specific items or groups of items, which may bemade by disbursing officer for purposes of his control over the expenditure, will not berecognised by the Accounts Officer and should not be intimated to him.

94. An appropriation is intended to cover all the charges including the liabilities, if any, of pastyears, to be paid during the year or to be adjusted in the accounts of it. It can be authorised bycompetent authority at any time before, but not after the expiry of the financial year. Any unspentbalance lapses and is not available for utilisation in the following years, except in so far as it has beenanticipated and re-included in the estimates.

IV-INCURRING OF EXPENDITURE IN ANTICIPATION OF FUNDS

95. In the event of the orders communicating the allotment of funds under paragraph 93 not beingreceived before the commencement of the financial year, disbursing officers may authoriseexpenditure in anticipation of funds on pay and other charges on the basis of that incurred in the lastmonth of the preceding year.

Note.- Appendix 6 to the Public Works Account Code lays down the rules for incurring expenditure in thePublic Works Department in anticipation of funds. These rules will apply mutatis mutandis to the expenditureon works executed by other departments, except where the controlling authority directs otherwise.

V-CONTROL OF EXPENDITURE

96. (1) The Secretary (which term shall be deemed to include the Secretary-in-charge) ofMinistry/Division shall continue to be the Principal Accounting Officer of his Ministry/Division, itsattached Departments and subordinate offices in respect of receipts as well as expenditure incurredfrom the budget grants controlled by his Ministry/Division.

r He shall be responsible for ensuring that -

~ (a) funds allocated to his Ministry/Division, its attached Departments or subordinate offices

are spent for the purpose for which they are allocated;

25


(b) the funds are spent strictly in accordance with the rules and regulations, and theexpenditure is not, primajacie, more than the occasion demands and that every Governmentservant exercises the same vigilance in respect of expenditure incurred from public funds as aperson of ordinary prudence would exercise in respect of expenditure of his own money;

(c) actual expenditure does not exceed the sanctioned budget allocation made for therespective items/operating units, etc. ;

(d) no expenditure is incurred in anticipation of authorisation of an annualBudget/Supplementary grants, without the prior concurrence of the Finance Division;

(e) all payments and receipts are correctly classified under appropriate codes of theClassification Chart and the departmental accounts are reconciled every month with the figurescommunicated by the CGA and the Chief Accounts Officer.

(f) audit objections are promptly settled.

(2) The powers and responsibilities of the Principal Accounting Officer of a MinistryIDivision inrespect of the autonomous bodies/corporations/organisations under his MinistryIDivision shall beprescribed by the special/general orders of the Finance Division.

97. The authority administering a grant is responsible for watching the progress of expenditure onpublic services under its control and for keeping the expenditure within the grant. In order that thecontrol of departments over such expenditure may be effective and real and that the controllingofficer should be in a position from month to month to estimate the likelihood of savings in andexcesses over grants and appropriations, the procedure laid down in the following rules should beobserved by all departments and controlling and disbursing officers subordinate to them except wherethe Finance Division has agreed in writing to some other procedure. ( )

98. (1) The head of each department will be responsible for controlling expenditure from the grantor grants at his disposal, and will exercise his control through the controlling officers, if any, and thedisbursing officers subordinate to him.

(2) Control over expenditure must be exercised with reference to the grant as it stands fromtime to time. It is the duty of the head of the department to distribute the grant as voted by theParliament or, in the case of non-voted (charged) appropriation, as sanctioned by the Governmentamong the various controlling and disbursing officers subordinate to him, so far as this has not beendone by the Finance Division. In so doing he must take into account lump sum cuts made by thesanctioning authority. He must similarly distribute any increases or reductions subsequently made inthe grant or in any part of it by the competent authority, whether the alteration is due to asupplementary grant, to a lump reduction or to a re-appropriation. When making his distributions, hemust invariably communicate to the officer concerned 'the complete accounts classification of eachitem distributed. Such distribution is however, not essential in the case of provision for pay ofofficers and of establishments. In making a distribution, it is always open to the head of a departmentto keep a portion of the grant as an undistributed reserve in his own hands.

(3) The following procedure must be followed by every disbursing officer in submitting claimsfor money:- .

(i) He must attach to each bill a slip in Form G. F. R.6, which will be returned by theAccounts Officer, with the cash or cheque, after noting thereon the voucher number andthe date assigned to the bill.

(ii) He must enter on each bill the complete classification code_of the proposed expenditure. I:)When a single bill includes charges falling under two or more economic classification '-codes the charges must be distributed accurately over the respective economicclassification codes.

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(iii)Except in the case of bills for the pay of officers or of establishments and for allowancesdrawn with pay, he must enter on each bill and on each slip in form G.F.R.6, the

( progressive total of expenditure up- to- date under the classification code to which the~~/ bill relates, including the amount of the bill on which the entry is made.

(4) In order to enable all concerned to watch expenditure against those portions of grantswhich are particularly liable to fluctuation, the following procedure must be followed in respect ofall bills other than those for pay of officers or of establishments and for allowances drawn with pay :-

(i) Every disbursing officer and, in respect of his own expenditure from portions of thegrant retained in his own hands, every controlling officer and head of department mustmaintain a separate register in Form G. F. R. 7 for such operating unit with which he isconcerned. In this must be entered the necessary particulars of the charges drawn oneach bill under the appropriate classification code.

(ii) On the third day of each month, a copy of the entries in this register, so far as theserecorded sums actually drawn from the Bank during the proceeding month, must be sentin full detail by the officer maintaining it to the head of the department or othercontrolling Officer. As certain of the entries in each month will represent bills whichwere not actually cashed before the end of that month, the copy sent will include a fewentries of a previous month and exclude a few made in the month for which the return issubmitted. With the copy must be forwarded all the slips in Form G. F. R. 6 which relateto the bills entered in it. If there be no entries in the register in any month, a "nil"statement must invariably be sent.

(iii) In order .to watch the receipt of the returns prescribed in the foregoing sub- clause, theC I controllin~ officer must maintai.n ~ ~road s~eet i~ Form.G. F. ~. 8, in which a serial

number will be allotted to each IndiVIdual dIsbursIng offIcer. ThIs broad sheet must becarefully watched and reminders sent if any returns are not received by the 7th of themonth, since the accuracy of the controlling officer's accounts will depend upon thereceipt of complete returns. The serial number allotted to each disbursing officer mustbe communicated to the Accounts Officer.

(iv) On receipt of the returns from disbursing officers, the controlling officer must carefullyexamine them and must satisfy himself -

(1) that progressive expenditure has been properly noted on the slips and the availablebalances worked out;(2) that the accounts classification has been properly given;(3) that expenditure up to date is within the grant;(4) that the returns have been signed by the disbursing officers; and(5) that all relevant slips in Form G.F.R.6 have been attached. If he finds any defects inthem, he must take immediate steps to rectify them.

(v) When all disbursing officers' returns for a particular month have been received andfound to be in order the controlling officer must prepare a statement in Form G.F.R.9, inwhich he will incorporate-

(I) the totals of the figures supplied by disbursing officers;(2) the totals taken from his own registers in Form G.F.R.7; and(3) the totals of adjustments under the various economic classification codes whichwill be communicated to him by the Accounts Officer on account of transfer entries andexpenditure debited to the grant through accounts current.

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If the controlling officer be not the head of the department, he must forward to the latterauthority a copy of this statement supporting it by the slips in Form G.F.R.6, and the copies of FormG.F .R. 7, submitted by disbursing officers and by a copy of the month's entries in the register in Form =)G.F.R.6.

If any adjustment communicated by the Accounts Officer affects the appropriation at thedisposal of a subordinate disbursing officer, the fact that it has been made must be communicated bythe controlling officer to the disbursing officer concerned.

(vi) On the receipt of all the necessary returns, the head of the department must prepare anaccount in Form G.F.R.10, showing the complete expenditure from the grant at hisdisposal up to the end of the preceding month. The figures of expenditure upon pay ofofficers and establishments and upon allowances drawn with pay will be communicatedto him by the Chief Accounts Officer as prescribed in sub- paragraph (5) below.

(vii) In August of each year, the Head of the Department must forward to the Accountsofficer a copy of his account for July in Form G.F.R.10. Subsequent to this, it willsuffice to send an abstract of the expenditure upto date under the various classificationcodes of disbursements in three columns, showing -

(I) expenditure up to the end of the preceding month;(2) expenditure during the month just concluded; and(3) total expenditure up-to-date, being the total of (I) and (2).

The subsidiary records in Forms G.F .R. 7 and 9 will be retained by the head of the department inhis own office, unless in any case the Chief Accounts Officer requires that the whole or any part of, them should be sent to him with the statement.

(viii)The head of the department and the Accounts Officer will be jointly responsible for thereconciliation of the figures given in the accounts maintained by the head of thedepartment with those that appear in the Accounts Officer's books. Unless in any casethere are special rules or orders to the contrary, the reconciliation should be mademonthly, the initial responsibility resting with the Accounts Officer. The reconciliationneed not be very close; its extent should be determined by the following considerations:-

(1) that the account figures finally published will be those maintained by Accountsofficer, and(2) ,that the main object of the reconciliation is to ensure that the departmentalaccounts are sufficiently accurate to render possible an efficient departmental control ofexpenditure.

(5) Expenditure on the pay of officers and establishments is not, as a rule, liable to violentfluctuations. Moreover, the provision for such expenditure is frequently not distributed amongdisbursing officers. It is therefore unnecessary to watch such expenditure through the forms andregisters prescribed in sub- paragraph (4) above. The figures of such expenditure will becommunicated monthly by the Chief Accounts Officer to the head of the department, who must enterthem in his account Form G.F .R.1 0 and watch the progress of expenditure against the grant.

(6) The head of the department and his controlling officers must further take steps to maintaina careful watch over expenditure incurred from time to time on important non- recurring objects, suchas grants and contributions, purchase of rations and purchase of uniforms. It is necessary to deal withsuch items separately from the accounts of ordinary monthly expenditure since they occur once ort,;ice only in the course of a y~ar. The head of ~he depart~ent or controlling officer must decide for ~hImself what method of watching such expendIture he will adopt. In some cases he may prefer to ,-

keep the entire grant under his own control and to order disbursing officers who wish to spendmoney against it to apply to him for a special allotment. In other cases, he may prefer to distribute the

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grant and to order his disbursing officers to report expenditure against it as soon as they incur suchexpenditure, separately from their ordinary monthly accounts. Whatever method he adopts, it isessential that he should keep himself informed, not only of actual expenditure against such grants, butalso of liabilities which have been incurred and must ultimately be met from them. Without suchinformation, no adequate control over expenditure can be exercised.'

(7) Under the procedure prescribed in these rules, a head of the department or controllingofficer should be in a position from month to month to estimate the likelihood of savings or excessesand to regularise them in accordance with the instructions laid down in paragraph 101 et seq.

Note 1: Special rules for the control of expenditure under Public Works are laid down in Appendix 6 to thePublic Works Account Code.

Note 2: Special rules for the control of expenditure in other departments to which the procedural rules in sub-'paragraphs (3) to (5) do no apply, will be contained in the departmental Regulations and Manuals.

99. The Chief Accounts Officer will warn the department concerned immediately of the firstappearance of any excessive proportionate outlay under any grant or under any operating unit. Itmust be clearly understood, however, that the authority administering a grant and not the AccountsOfficer is ultimately responsible for the control of expenditure against the grant.

VI- PROVISION OF FUNDS FOR WORKS EXECUTEDTHROUGH A DIFFERENT AUTHORITY

100. In order to ensure that a department undertaking a work on behalf of another does not exceed.the sanctioned estimates without the authority of the employing department, the department

responsible for providing the funds should intimate to the department undertaking the work theC sanctioned grant within which the expenditure is to be incurred. The department incurring the

-expenditure shall be responsible not only for seeing that the allotment placed at its disposal is notexceeded but also that any anticipated savings are notified and surrendered in time. In cases where anexcess is anticipated, the department incurring the expenditure shall be responsible for obtaining theadditional allotment in proper time through the employing department;

VII- SURRENDER OF ANTICIPATED SAVINGS

101. A department or disbursing officer may find in the course of the year that the expenditure undersome items or operating units is likely to be less than the provision in the Budget. The saving may bedue to one or more of the following causes:-

(i) actual postponement of expenditure;(ii) real savings due to economy; and(iii) normal savings due either -

( 1) to original over- estimating; or(2) to the usual administrative causes, e.g., casualties, etc.

Savings due to cause (i) should in no circumstances be used for reappropriation to meet newitems of expenditure without the sanction of Government. Unless savings due to cause (ii) have beenmade deliberately to provide for an unforeseen emergency, they should not ordinarily be utilised inthe course of the year for new items of expenditure, as it is desirable that all such new items shouldbe considered together at the time of the preparation of the Budg~t.

102. All anticipated savings should be surrendered to Government immediately they are foreseen( without waiting till the end of the year, unless they are required to meet excesses under some other

unit or units (see paragraph 105) which are definitely foreseen at the time. No savings should be heldin reserve for possible future excesses.

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103. It is contrary to the interest of the State that money should be spent hastily or in an ill-considered manner merely because it is available or that the lapse of a grant could be avoided. In thepublic interest, grants that. cannot be profitably. utili sed. should ?e surrend~red. The existe~ce of lik~ly ~

)savings should not be seIzed as an opportumty for mtroducmg fresh Items of expendIture whIch ~might wait till next year. A rush of expenditure particularly in the closing months of the financialyear will ordinarily be regarded as a breach of financial regularity.

VIII -EXPENDITURE NOT PROVIDED FOR RE- APPROPRIATIONS ANDSUPPLEMENTARY GRANTS.

GENERAL RULES FOR SUPPLEMENTARY GRANTS

104. Expenditure for which no provision has been made in the original budget estimate of thecurrent financial year should rarely, if ever, be incurred.

105. (1) It may, however, be found that an excess is likely owing to either (a) an unforeseenemergency or, (b) underestimating or insufficient allowance for factors leading to the growth ofexpenditure. In the case of an excess of either type, the head of the department or controlling officerconcerned should proceed as follows :-

(i) He should in the first place examine the allotments given to other disbursing officers under thesame classification code inside the unit of appropriation, and transfer to the disbursing officer whorequires an additional allotment such sums as can be permanently or temporarily spared. Sinceappropriation audit will ordinarily be conducted against total allotments for a unit there is no question

, of re-appropriation in the technical sense of the word. The process amounts to nothing more than

redistribution, which the controlling officer can ordinarily effect without reference to any other ! /\authority. -)

(ii) Should he find such redistribution impossible, he should examine the allotments against otherclassification codes inside the primary units of appropriation, with the object of discovering probablesavings and effecting a transfer. Where such redistribution is feasible, he should, if he has beeninvested with the necessary powers, carry it out. Otherwise, he should obtain the sanction of thecompetent authority.

(iii) If provision of funds from within the primary unit proves to be impossible, an examination of thewhole grant should be undertaken to see whether there are likely to be savings under any of the otherunits of appropriation due to cause (iii) described in paragraph 101, which can be utilised to meet it.If so, he should proceed as indicated in clause (ii) above.

(iv) If such savings are not available, it should be seen whether special economies can be effectedunder other items of expenditure. If funds cannot be provided by either of these methods, it will haveto be considered whether the excess should be met by postponement of expenditure or whether anapplication for a supplementary grant should be made. In either case, application will have to bemade to the Finance Division through the Administrative Department concerned and the courserecommended by the latter stated. Normally, an application for a supplementary grant will not beentertained by Government unless the anticipated excess is due to a cause beyond the control of theauthority concerned and funds cannot be found by any legitimate postponement of expenditure forwhich provision already exists. All application for supplementary grants should be accompanied by afull explanation of the reason for the excess and of the impossibility of providing funds to meet it.

(2) All applications for supplementary grants under paragraph (1) should normally be 0submitted to Government so as to reach the Finance Division as far as possible, by the middle ofDecember at the latest or by such other date as may be prescribed by the Finance Division from time

30


to time. Administrative Departments should not, however, hold up the applications till that date, butforward each application to the Finance Division as soon as they become convinced that a

C supplementary grant will be necessary.

(3) On receipt of an application for a supplementary grant, the Finance Division will reviewthe position of the grant as a whole with reference to the known actuals of the year to date and actualsand estimates for previous years. If after this examination the Finance Division comes to theconclusion that it should be possible for the Administrative Department to meet the expenditurewithin the sanctioned grant, either from normal savings or by special economies or in the last resortby judicious postponements of other expenditure, the Administrative Department will be so informedand no supplementary demand will be presented to the Parliament. If, on the other hand, the FinanceDivision considers that a supplementary grant will be necessary a demand will be placed before theParliament as soon as possible.

(4) The supplementary grants and appropriations referred to in the preceding paragraphs aresuch as are required by extra expenditure on the normal activities of the department. Expenditure on anew service, in the technical sense, and on new items, such as, new buildings, new roads, etc, forwhich no provision exists in the budget, may be incurred in the middle of the year only in exceptionalcases. Government is averse, on general principle, to admitting such demands in the course of year.In case, however, the necessity to incur such expenditure is urgent, the Administrative Departmentshould explain clearly why it was not provided for in the original Budget and it cannot be postponedfor consideration in connection with the next Budget. The Finance Division, if satisfied on thesepoints, will consider whether it would not be reasonable to ask the department concerned to curtail itsother expenditure so as to keep the total within the grant. Ordinarily, no new service or item will beaccepted by the Finance Division unless the department concerned can guarantee that the extraexpenditure will be met from normal savings or by special economies within the grant. Cases which

C involve a supplementary grant will normally be accepted by the Finance Division only if they relateto matters of real imperative necessity, or to the earning or safe-guarding of revenue. In such casesthe demand for a supplementary grant, or for a token grant in respect of a 'new service' if theexpenditure can be met by re-appropriation, will be presented to the Parliament as soon as practicableafter the need arises.

REAPPROPRIATION OF FUNDS

106. Reappropriation, which implies the transfer of funds from one primary unit of appropriation toanother such unit within a grant, can be sanctioned under formal orders of a competent authority,only when it is known or anticipated that the appropriation for the unit from which funds are to bediverted will not be utilised in full, or that savings can be effected in the appropriation for that unit inthe manner indicated in paragraph 101. In no case it is permissible to reappropriate from a unit withthe intention of restoring the diverted appropriations to that unit when savings become availableunder other units later in the year. Any allotment or reappropriation within a grant or appropriationmay be authorised at any time before but not after the expiry of the financial year to which such grantor appropriation relates.

107. The different kinds of re-appropriations that may arise and the authorities competent tosanction the re-appropriations are detailed below :-

(1) From a voted item to another voted item within a grant-(a) The Finance Division can sanction reappropriation from one voted item to another voted itemwithin a grant;

b) Ministers can sanction reappropriation between operating units which does not involveundertaking a recurring liability.

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(2) From a voted item to another voted item involving re-appropriation from one grant to another:-Supplementary grants should be voted by the Parliament in such cases, as no authority subordinate toit has power to reappropriate. ,-)

(3) From one charged item to another charged item:- Ministers may sanction reappropriation fromone operating unit to another. The Finance Division should sanction any other formal reappropriationthat may be necessary from one charged item to another.

(4) From a charged item to a voted item:- No reappropriation is admissible as the voted grant cannotbe increased except by the Parliament.

(5) No re-appropriation from a voted to a charged item is admissible, but the Finance Division cansanction supplementary funds for any charged service against earmarked savings under specifiedvoted grants, provided that executive orders are issued to the authority controlling the specified votedgrant to restrict the expenditure within the reduced figure.

Note: The powers of reappropriation conferred upon subordinate authorities are also subject to the conditionspecified therein and such other general or specific restriction as may be imposed by Government in this behalf.

108. An application for additional. appropriation of funds should ordinarily be supported by astatement in Form G.F.R.l1 (or other special form as may be authorised by departmental regulations)showing how the excess is proposed to be met. In all orders sanctioning re-appropriation, the reasonsfor savings and excess and the primary units (and secondary units, where necessary) affected shouldbe invariably stated. The authority sanctioning the appropriation should endorse a copy of the orderto the Chief Accounts Officer concerned.

INEVITABLE PAYMENTS

109. It is an important financial principle that money indisputably payable should not, as far aspossible, be left unpaid, and that money paid should under no circumstances be kept out of accountsa day longer than is absolutely necessary even though the payment is not covered by proper sanction.It is no economy to postpone inevitable payments even for the purpose of avoiding an excess over agrant or appropriation and it is very important to ascertain, liquidate and record the payment of allactual obligations at the earliest possible date. It must be borne in mind that if an inevitable paymentis required to be made in the absence of funds, the error lies not so much in the payment as in theentering into of the relevant liability.

Note. When demands (original or supplementary) are placed before the Parliament, suitable provision shouldalways be made for anticipated liabilities; and the provision in the Note below paragraph 299(2) thatadjustment should not be made in the previous year's accounts in certain circumstances should not be used as acloak to cancel the results of defective budgeting. The onus of providing that the disbursement could not havereasonably been anticipated should lie on the controlling officer.

110. A disbursing officer may not on his own authority authorise any payment in excess of thefunds placed at his disposal; but absence of funds should not necessarily prevent the payment of anysums really due by Government. If the disbursing officer is called upon to honour a claim which iscertain to produce an excess over the allotment or appropriation at his disposal, he should take theorders of the administrative authority to which he is subordinate before authorising payment of theclaim in question.

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IX- RELEASE AND USE OF FUNDS FOR DEVELOPMENT PROJECTS

C) INTRODUCTORY

111. External assistance is presently required in Bangladesh to meet both balance of payments andinvestment gap. Generally four kinds of assistance are obtained from external sources. There is foodaid to meet the gap between consumption and stock requirement on the one hand and domesticproduction on the other. Commodity aid seeks to meet the import needs for various inputs, rawmaterials and spares which cannot be financed with own resources. Project aid which is tied toprojects essentially provide capital assistance and often finance a part of local currency expenditureon projects. The last kind of external assistance is technical assistance which provides, inter alia,services of experts & equipment that improve skills and provide for training. The need for and likelyavailability of all these kinds of external assistance are carefully considered by the Governmentthrough interministrial consultations before finalising the Annual Development Programme. TheGovernment prescribes from time to time guidelines for processing, approval, implementation andmonitoring of projects involving external assistance.

112. The local currency requirement of development projects is met by domestic resources allocatedin the development budget, counterpart funds generated by food and commodity assistance and localcurrency support provided by Development Partners.

PROCEDURE FOR RELEASE OF LOCALCURRENCY FOR DEVELOPMENT PROJECTS

113; Procedure for release of local currency funds provided for in the ADP for projectimplementation depends on the approval status of the project. All ADP provisions must first berendered into budget grant which is now done before the budget is presented to Parliament. Releases

C of funds are made on quarterly basis according to procedures prescribed by the Finance Divisionfrom time to time. The Finance Division also lays down procedures for release and payment ofCustoms Duties and Value Added Tax relating to development projects. Finance Division's OM No.MFIFD/DEV -1/MISC-46/95/40 1 (3000) dated 28 December 1995 contains detailed proceduressubject to modifications made from time to time.

UTILIZATION OF REIMBURSABLE PROJECT Am

114. (1) Project aid usually covers payment of goods and services in foreign exchange. Differentpevelopment Partners follow various procedures for disbursement of project aid required forpayment of goods and services in foreign exchange. They also follow different procedures forreimbursable project aid covering both foreign exchange and local currency. Once local currencyfinancing is negotiated for a project it has to be ensured that such a project follows the stipulatedimplementation schedule very closely. Local currency reimbursements must be claimed promptly andsystematically. In few cases advances are provided for local currency expenditure by DevelopmentPartners. In such cases, it is important to submit accounts of expenditure promptly.

(2) In respect of projects financed by the International Development Association (illA),Government of Bangladesh and the World Bank have agreed to set up Convertible Taka SpecialAccount (CONTASA) for development projects under the GovernmentDepartments/Autonomous/Semi-Autonomous bodieS. All project expenditure eligible for illAfinancing in local currency and any expenditure in foreign exchange up to US$ 50000 equivalent orless can be met from CaNT ASA. All expenditure/payment under CaNT ASA shall be incurred/madeas per approved Project Proforma (PP) and terms and conditions of Development Credit Agreementand Project Agreement. Special Account in Foreign Exchange (SAFE), the forerunner of CaNT ASA,

C which have been in operation for illA financed projects since 1985 shall not however come under thepreview of CONTASA until a review has been completed jointly by the Government and illA.Detailed procedures for operation of CO NT AS A and SAFE are contained in Finance Division's O.M.MF/FD/DRS/3/91/444(20) dated May 4, 1992 and No. MFD-l/BT-l/IA-26/84-85/376/1(100) dated29 may, 1985, respectively.

33


(3) For projects financed by the Asian Development Bank (ADB), the Government and theADB have agreed to institute an Imprest Account Facility similar to the World Bank's SAFE forreimbursable project aid. Such Imprest Facility covers all loan categories (except for unallocated and ')service charge during construction), both foreign and local expenditure. Ceiling of Imprest fund,whenever possible, is stated in the Loan Agreement or in the Minute of Loan Negotiations.Otherwise, the amount of the initial advance ( 3 to 6 month's requirement) establishes a ceiling.Executing agencies can make (i) all local payments from the Second Stage Imprest Account and (ii)foreign exchange (limit US $ 50,000 equivalent per payment) from Imprest Fund held at BangladeshBank. Operational procedure prescribed for this facility are elaborated in Finance Division's O.M.No. MFIFD/DRS/25/92(p-I)/141/(200) dated 25 April, 1993.

(4) With regard to IDA technical assistance project, Government and IDA have recently agreedto set up a Dollar Special Account (DOS A) in the Bangladesh Bank the operational procedure ofwhich has been detailed in Finance Division's O.M. No.MFIFD/DEV.RESEARCHSECTION/10/92/84 (100) dated 5 June, 1993.

(5) The procedure for release and use of funds for development projects laid down in theserules will be applicable subject to revisions that may be made by the Government from time to time.

X- APPROPRIATION ACCOUNTS

115. The Appropriation Accounts mainly depend on explanation furnished by heads of departmentsetc., to the Chief Accounts Officer as to the cause of variations between the appropriations and theexpenditure. It is most important, therefore, that all references from the chief Accounts Officer inconnection with the Appropriation Accounts should be dealt with as promptly as possible. Theexplanati.on furnished o~ vari~tions between appropriat~on and expenditure or .of any apparent failures ~

)to exerCIse adequate fInancIal control over expendIture should be conCIse, accurate and fully (informative, and such vaguely worded phrases as "due to over estimating", "covered byreappropriation" or "reappropriations proved unnecessary or inadequate" should be avoided. Thequestions in which the Public Accounts Committee are ordinarily interested are (I) whether thevariation was inevitable, and (2) whether it could not have been foreseen. If the explanations indicate,with sufficient clearness, the answers to both of these questions the number of points on whichadditional information may be required would be very materially reduced. The same principle appliesalso to cases of financial irregularities proposed for inclusion in the Appropriation Accounts or theReport thereon.

(~

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~ compila tion of the general financial rules of thelib.pmo.gov.bd/gfr/1.pdf~ compila tion of the...

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